SEC Charges NVIDIA Corporation with Inadequate Disclosures about Impact of Cryptomining

Washing짯ton D.C., May 6, 2022 The Secu짯ri짯ties and Exch짯an짯ge Com짯mis짯si짯on today announ짯ced sett짯led char짯ges against tech짯no짯lo짯gy com짯pa짯ny NVIDIA Cor짯po짯ra짯ti짯on for ina짯de짯qua짯te dis짯clo짯sures con짯cer짯ning the impact of cryp짯to짯mi짯ning on the company셲 gam짯ing business.

The SEC셲 order finds that, during con짯se짯cu짯ti짯ve quar짯ters in NVIDIA셲 fis짯cal year 2018, the com짯pa짯ny fai짯led to dis짯c짯lo짯se that cryp짯to짯mi짯ning was a signi짯fi짯cant ele짯ment of its mate짯ri짯al reve짯nue growth from the sale of its gra짯phics pro짯ces짯sing units (GPUs) desi짯gned and mar짯ke짯ted for gam짯ing. Cryp짯to짯mi짯ning is the pro짯cess of obtai짯ning cryp짯to rewards in exch짯an짯ge for veri짯fy짯ing cryp짯to tran짯sac짯tions on dis짯tri짯bu짯ted led짯gers. As demand for and inte짯rest in cryp짯to rose in 2017, NVIDIA cus짯to짯mers incre짯asing짯ly used its gam짯ing GPUs for cryptomining.

In two of its Forms 10멡 for its fis짯cal year 2018, NVIDIA repor짯ted mate짯ri짯al growth in reve짯nue within its gam짯ing busi짯ness. NVIDIA had infor짯ma짯ti짯on, howe짯ver, that this increase in gam짯ing sales was dri짯ven in signi짯fi짯cant part by cryp짯to짯mi짯ning. Despi짯te this, NVIDIA did not dis짯c짯lo짯se in its Forms 10멡, as it was requi짯red to do, the짯se signi짯fi짯cant ear짯nings and cash flow fluc짯tua짯tions rela짯ted to a vola짯ti짯le busi짯ness for inves짯tors to ascer짯tain the likeli짯hood that past per짯for짯mance was indi짯ca짯ti짯ve of future per짯for짯mance. The SEC셲 order also finds that NVIDIA셲 omis짯si짯ons of mate짯ri짯al infor짯ma짯ti짯on about the growth of its gam짯ing busi짯ness were mis짯lea짯ding given that NVIDIA did make state짯ments about how other parts of the company셲 busi짯ness were dri짯ven by demand for cryp짯to, crea짯ting the impres짯si짯on that the company셲 gam짯ing busi짯ness was not signi짯fi짯cant짯ly affec짯ted by cryptomining.

NVIDIA셲 dis짯clo짯sure fail짯ures depri짯ved inves짯tors of cri짯ti짯cal infor짯ma짯ti짯on to eva짯lua짯te the company셲 busi짯ness in a key mar짯ket, said Kris짯ti짯na Litt짯man, Chief of the SEC Enforce짯ment Division셲 Cryp짯to Assets and Cyber Unit. 쏛ll issuers, inclu짯ding tho짯se that pur짯sue oppor짯tu짯ni짯ties invol짯ving emer짯ging tech짯no짯lo짯gy, must ensu짯re that their dis짯clo짯sures are time짯ly, com짯ple짯te, and accurate.

The SEC셲 order finds that NVIDIA vio짯la짯ted Sec짯tion 17(a)(2) and (3) of the Secu짯ri짯ties Act of 1933 and the dis짯clo짯sure pro짯vi짯si짯ons of the Secu짯ri짯ties Exch짯an짯ge Act of 1934. The order also finds that NVIDIA fai짯led to main짯tain ade짯qua짯te dis짯clo짯sure con짯trols and pro짯ce짯du짯res. Wit짯hout admit짯ting or deny짯ing the SEC셲 fin짯dings, NVIDIA agreed to a cea짯se-and-desist order and to pay a $5.5 mil짯li짯on penalty.

The SEC셲 inves짯ti짯ga짯ti짯on was con짯duc짯ted by Brent Wil짯ner of the Cryp짯to Assets and Cyber Unit, and super짯vi짯sed by Dia짯na Tani and Ms. Litt짯man of the Cryp짯to Assets and Cyber Unit.